Recent studies show consumers’ concerns about high costs impacting their access to healthcare and increasing medical debt. A survey by Gravie and Wakefield Research showed that 86% of consumers are worried about their health benefits not covering a portion or all of their exams, treatments, or procedures for 2022.
However, despite the inflationary environment and macroeconomic uncertainties, healthcare companies tend to perform relatively well due to almost inelastic demand for their goods and services. According to the Centers for Medicare & Medicaid Services (CMS), healthcare spending in the United States is slated to expand at a 5.4% CAGR to $6.20 trillion in 2028.
Also, an aging population and a surge in chronic lifestyle diseases will likely keep demand for the medical sector high. In addition, according to the Labor Department, employment in the healthcare sector has increased significantly. The industry added 53,000 positions in October.
Given the backdrop, investors could consider buying fundamentally solid medical stocks UnitedHealth Group Incorporated (UNH) and Abbott Laboratories (ABT) for long-term stability.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. It operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx.
On October 14, 2022, Andrew Witty, UNH’s CEO, said, “The strength of our performance reflects the diligence and determination of our colleagues to improve people’s experience across the health care system and make high-quality care simpler, more accessible and more affordable.”
UNH has paid dividends for 19 consecutive years. Its dividend payouts have increased at 17.7% CAGR over the past five years. Its current dividend yield is 1.26%, while its four-year average yield is 1.36%.
UNH’s total revenue came in at $80.89 billion for the third quarter that ended September 30, 2022, up 11.8% year-over-year. Its net earnings increased 28.7% year-over-year to $5.26 billion. Also, its EPS came in at $5.55, up 29.7% year-over-year.
Analysts expect UNH’s revenue to increase 12.4% year-over-year to $323.31 billion in the current year. Its EPS is estimated to grow 15.8% year-over-year to $22.03 in 2022. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 14.1% to close the last trading session at $522.08.
UNH’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UNH has a B for Growth, Stability, Sentiment, and Quality. In the A-rated Medical – Health Insurance industry, it is ranked #2 out of 11 stocks. Click here for the additional POWR Ratings for Value and Momentum for UNH.
Abbott Laboratories (ABT)
ABT discovers, develops, and sells healthcare products focused on cardiovascular, diabetes care, diagnostics, neuromodulation, nutrition, and medicine worldwide. Its products are sold directly to wholesalers, distributors, government agencies, healthcare facilities, pharmacies, and independent retailers.
On October 19, 2022, Robert B. Ford, ABT’s chairman, and CEO, said, “Our results and increased guidance in the current macroeconomic environment reflect the strength of our diversified business model and execution.”
ABT has paid dividends for 33 consecutive years. Its dividend payouts have increased at a 12.1% CAGR over the past five years. Its current dividend yield is 1.81%, while its four-year average yield is 1.49%.
ABT’s net sales came in at $33.56 billion for the nine months that ended September 30, 2022, up 6.2% year-over-year. Its net earnings came in at $7.66 billion, up 9.3% year-over-year, while its EPS came in at $4.31, up 10.8% year-over-year.
Street expects ABT’s revenue to increase marginally year-over-year to $43.21 billion in the current year. Its EPS is estimated to grow marginally year-over-year to $5.22 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 2.3% to close the last trading session at $104.09.
ABT has an overall rating of B, which equates to a Buy in our POWR Ratings system. It also has a B grade for Stability, Sentiment, and Quality. ABT is ranked #6 out of 141 stocks in the Medical – Devices & Equipment industry. Click here for the additional POWR Ratings for ABT (Value, Growth, and Momentum).
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UNH shares were trading at $520.46 per share on Monday afternoon, down $1.62 (-0.31%). Year-to-date, UNH has gained 4.65%, versus a -14.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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